Combining Multiple Crypto Tax Software Together: A Comprehensive Guide

Crypto tax softwares like CoinTracker, TokenTax, ZenLedger, CryptoTrader.Tax (now CoinLedger), Koinly, TaxBit, and BearTax. What are the benefits of combining multiple crypto tax softwares together? 

Managing cryptocurrency taxes can be an intricate and daunting process, especially for individuals and businesses with diverse portfolios or numerous transactions across various platforms. The complexity increases with decentralised finance (DeFi) activities, non-fungible tokens (NFTs), staking rewards, and cross-border transactions. While crypto tax software simplifies these tasks, no single tool may cater to all the needs of a user. In such cases, combining multiple crypto tax software can be a pragmatic solution. 

Combining crypto tax software refers to the process of using multiple cryptocurrency tax tools together to manage, calculate, and report tax obligations related to cryptocurrency transactions. This approach can address gaps in functionality, improve accuracy, and cater to the diverse needs of individuals or businesses with complex cryptocurrency portfolios.

Cryptocurrency transactions, such as trading, staking, yield farming, and NFT sales, often span multiple exchanges, wallets, and decentralised platforms. A single tax software solution may not always cover every aspect of such activities. Combining multiple tools ensures that all transactions are accounted for, categorised correctly, and reported accurately for tax compliance.

Why consider combining crypto tax software?

1. Comprehensive coverage: Each crypto tax software has unique strengths and limitations. Some excel at handling DeFi transactions, while others specialise in NFT trading or basic spot trades. By using multiple platforms, users can ensure all aspects of their portfolio are accounted for without omissions.

2. Improved accuracy: Different tax tools may interpret or process data from exchanges and wallets differently, leading to inconsistencies. Cross-verifying the outputs of various platforms ensures greater accuracy and minimises errors, which is crucial for compliance with tax regulations.

3. Support for diverse transaction types: Crypto transactions can vary widely, from basic buy and sell trades to complex activities such as yield farming, liquidity pooling, and staking rewards. Integrating multiple tax software tools ensures that specialised transaction types are tracked and categorised accurately.

4. Regulatory compliance: Tax laws governing cryptocurrencies vary by jurisdiction and are frequently updated. Combining tax software allows users to adapt to specific requirements, such as different cost-basis methods or rules governing taxable events.

5. Backup and redundancy: Using multiple platforms acts as a safeguard against data loss or processing errors. This redundancy ensures that even if one tool fails to provide accurate results, the other can serve as a reliable backup.

Common scenarios for combining crypto tax software

1. Exchange tax calculators: Some exchanges, like Binance, offer in-built tax calculators. However, these tools often only account for transactions within the specific platform and may not track cost bases for assets transferred from other wallets or exchanges. In such cases, combining exchange calculators with comprehensive tax software provides a holistic view of transactions and ensures accurate calculations.

2. Multi-asset platforms: Platforms like Revolut or eToro, which facilitate investments beyond cryptocurrencies, pose additional challenges. While these may integrate seamlessly with crypto tax software for crypto transactions, calculations for stocks, ETFs, or commodities must be handled separately. Users can combine crypto-specific tools with general tax software to address this issue.

3. Tax preparation software: Many individuals use tax preparation software such as TurboTax or TaxAct for their annual filings. While these platforms often support crypto tax reports, limitations in compatibility with exchange-generated CSV files may arise. Combining crypto tax software with tax preparation tools ensures that all data is correctly formatted and ready for submission.

4. Handling complex portfolios: Investors with advanced portfolios involving high-frequency trades, staking rewards, and cross-chain transactions may find that no single tool can handle all their needs. By integrating multiple crypto tax software platforms, users can address gaps in functionality and achieve accurate reporting.

Steps to combine Crypto tax software

1. Evaluate your needs: Before choosing software, evaluate your crypto portfolio and identify the types of transactions you need to report. Consider:

• The number of exchanges and wallets used.
• Transaction types, including trades, staking rewards, NFTs, and DeFi activities.
• Tax regulations in your jurisdiction.

2. Select compatible software: Choose software tools that complement each other’s strengths. For instance, a tool that excels in DeFi tracking can be paired with another that supports comprehensive exchange integrations. Common options include:

• CoinTracker: Offers wide exchange compatibility and is suitable for diverse portfolios.
• Koinly: Ideal for users seeking an intuitive interface and robust reporting.
• ZenLedger: Excels in handling DeFi, staking, and NFT transactions.
• TokenTax: Known for its integrated tax filing options.
• CryptoTaxCalculator: Focuses on accurate transaction classification for beginners and experienced investors alike.

3. Consolidate transaction data: Export transaction histories from all exchanges, wallets, and platforms you use. Data can typically be exported as:

• CSV Files: Contains a summary of transactions.
• API Keys: Enable real-time data synchronisation.

4. Import data into each platform: Upload your transaction data to the selected platforms. Ensure consistent categorisation of transactions, including:

• Trading: Buys, sells, and swaps.
• Income: Rewards from staking, mining, or airdrops.
• Expenses: Gas fees, transaction fees, and transfer costs.

5. Cross-verify results: Compare the outputs from each platform. Check for:

• Transaction Totals: Ensure all transactions are accounted for.
• Cost Basis Calculations: Verify that the cost basis matches across tools.
• Reported Gains and Losses: Confirm consistency in final calculations.

6. Resolve discrepancies: Address inconsistencies by verifying transaction histories and reimporting corrected data if necessary. Ensure all platforms are using the same cost basis method, such as FIFO (First In, First Out), LIFO (Last In, First Out), or HIFO (Highest In, First Out).

7. Generate final tax reports: Use the software that provides the most accurate and complete data to generate your final tax report. Most platforms support standard formats, including:

• Form 8949 for U.S. taxpayers.
• Capital gains summaries for other jurisdictions.
• Custom reports for personal records.

Best practices for combining crypto tax software

1. Use consistent cost-basis methods

The cost basis method determines how gains or losses on assets are calculated. Common methods include:

• FIFO (First In, First Out): The earliest purchased assets are sold first.
• LIFO (Last In, First Out): The most recently purchased assets are sold first.
• HIFO (Highest In, First Out): The highest-cost assets are sold first.

Why it matters: If different software platforms use different cost basis methods, the calculated gains and losses may differ significantly, leading to discrepancies in tax filings. For example, using FIFO on one platform and LIFO on another can result in mismatched reports and potential audit flags.

Best practice: Ensure all platforms are configured to use the same cost basis method. Review the settings in each tool and align them to the method best suited to your jurisdiction or financial strategy. Some countries, such as the United States, allow taxpayers to choose their cost basis method, but consistency is key.

2. Automate data integration

Data integration is the backbone of accurate crypto tax calculations. Most crypto tax software tools offer API integrations and CSV file imports to sync transaction data from exchanges and wallets.

Why it matters: Manual data entry is prone to errors, such as missed transactions or incorrect amounts. Automating the process reduces the likelihood of mistakes and ensures that your data remains up-to-date.

Best practice

• API integration: Use API keys to connect exchanges and wallets directly to the tax software. This ensures real-time syncing of transaction data and reduces manual effort.
• CSV imports: If API integration is unavailable, use CSV file exports from exchanges and wallets. Check for specific formatting requirements before uploading.
• Regular updates: Periodically update data from all sources, especially before generating reports, to account for new transactions.

3. Leverage customer support

Most crypto tax software providers offer customer support to help users resolve issues, clarify calculations, and navigate complex transactions.

Why it matters: Combining multiple tools increases the complexity of the process. Errors such as missing transactions, incorrect classifications, or misaligned cost basis methods can arise. Expert support can help address these issues promptly.

Best practice

• Contact support Early: Reach out to support teams as soon as issues are identified. Many platforms offer live chat, email, or phone support for quick assistance.
• Use knowledge bases: Explore the software’s FAQs, tutorials, and guides for step-by-step solutions to common problems.
• Premium services: Consider upgrading to premium plans that offer one-on-one consultations or audit support, especially for high-value or complex portfolios.

4. Test reports before filing

Testing your tax reports before filing is crucial to ensure the accuracy of your calculations and compliance with tax laws.

Why it matters: Errors in tax reports can lead to penalties, audits, or additional tax liabilities. Testing allows you to identify and correct discrepancies before submission.

Best practice

• Generate trial reports: Use each platform to create preliminary reports. Compare figures such as gains, losses, and taxable income across tools to identify discrepancies.
• Cross-verify data: Check the consistency of transaction totals, cost basis calculations, and classification of income (e.g., staking rewards, mining rewards).
• Simulate filing: Some software tools allow you to preview how the data will appear in tax forms such as Form 8949 (U.S.) or equivalent forms in other jurisdictions. Use this feature to verify accuracy.

5. Stay informed on regulations

Cryptocurrency tax regulations vary by country and are subject to frequent updates. Staying informed ensures compliance and helps you take advantage of any new tax-saving opportunities.

Why it matters: Tax authorities worldwide are increasingly scrutinising cryptocurrency transactions. Non-compliance, whether intentional or due to ignorance, can result in fines or legal action.

Best practice

• Monitor regulatory updates: Follow news from your local tax authority or consult a tax professional to stay updated on new rules and requirements.
• Use updated software: Choose tax tools that regularly update their algorithms and compliance features to reflect the latest regulations.
• Track-specific rules: Certain jurisdictions have unique rules, such as Canada’s superficial loss rule or the U.S. wash sale rule. Ensure your chosen software accounts for these nuances.
• Plan ahead: Review your portfolio and transaction history periodically to anticipate potential tax liabilities and make adjustments, such as offsetting gains with losses.

Conclusion

Combining multiple crypto tax software tools is a practical approach for individuals with complex cryptocurrency portfolios. This strategy ensures comprehensive reporting, minimises errors and facilitates compliance with tax regulations. By carefully selecting compatible tools, consolidating data, and cross-verifying results, users can streamline their tax filing process and achieve accurate outcomes.

As the cryptocurrency landscape continues to evolve, staying informed about tax regulations and leveraging the right tools will remain essential for effective portfolio management and reporting.